It was bought... in the USA... Owner and CEO of Cash Flow Gold Jason Simpson talks about why investing in the US is no longer taboo, why everyone wants to stay where the winter wind chill is minus 40, and how North Dakota has become the Port Hedland of America
You’ve been investing in the US for a while now. What’s the attraction?
In America, the onset of the global financial crisis created a perfect opportunity, the perfect storm if you like – a once in a generation opportunity to get in and buy homes at 5–10% of the property prices here in Australia. I became interested and wanted initially to set up a passive income stream for life, allowing me to personally have a better lifestyle with more choices. Values have increased since then but you can still find properties in areas like Atlanta for about $90,000, and they are renting for about $950 to $1,050 per month – about 13.7%; and in beautiful areas of Michigan you can buy solid brick homes for about $40,000 to $50,000.
What tips do you have for investors who might want to do the same?
Australians love to invest; it’s just in our DNA. We want to control our own futures, and I think US property – providing you can avoid a flipped home and have a good understanding of how it all works – really gives you a great opportunity to set yourself up with passive income and assets. But there is a real risk in buying in the US, there’s no doubt about that. Investors need to understand what they are doing; and they’re not silly, they’ve heard the stories about people who flip homes and people who have lost their life savings. The main point is to avoid buying a flipped property; and for about $5,000 you can fly over there and be sure about what you are buying and get an honest assessment.
You spend a lot of time in North Dakota where winter temperatures are well below zero. Are you part Eskimo?
An oil boom in the Bakken region of North Dakota is putting this area on the map for investor activity. I’m there five times a year, and in February this year it was minus 27, with a wind chill of minus 40, so literally within 45 seconds of getting out of your car your nose starts to freeze and your ears and fingers go numb. But having said that, outside there are still a lot of people working, and construction is still going on. Sure they had scarves and big jackets and gloves things like that, but the world doesn’t stop consuming oil. The first three feet of the ground is frozen, but those drill bits can get through some pretty tough stuff.
An oil boom you say. Is it anything like the boom we had in WA?
The resource boom in the US is really based around fracking wells for oil, but there are massive gas plants under construction and there’s going to be a really big push in the next few years to capture a minimum amount of gas out of these as well. It’s like getting into Port Hedland before the boom really started.
What does that mean for you as a US investor?
We have ownership of 60 acres right in the heart of the oil boom where we are doing our own commercial hotel, and we imagine those will bring in returns north of 20% quite comfortably. It will be completed this year in July with 168 hotel rooms. There are also 3,000 rooms coming online next year in and around Watford City and Mackenzie County, and three major developments of residential homes, apartments and townhouses in the works that are independent of our project.
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